Power Sector - Opportunities within the Challenges

Background: With the advent of renewable energy sources, social media connectivity, and a revolution in electric vehicles (EV), the traditional power industry (especially utilities) is facing challenges that it has never seen before. The industry must optimize the cost of business and meet customer expectations. After the Paris climate accord of 2015, a consortium of 121 solar resource rich countries, also known as the International Solar Alliance, are working on reducing the cost of technology and device financing. For future energy requirements, many nations are now encouraging the use of non-conventional sources of energy, while increasing costs and taxes for the conventional sources. In the future, customers currently receiving electricity themselves, and act as mini-generators.

Challenges & Opportunities:

Challenges and Opportunities

Structural Changes: To meet the current challenges, utilities need to look towards a scope of improvement within themselves. A major cultural challenge that most power companies face, is the focus on short-term goals. Many companies deep-dive into money-saving tactics, like budget-cuts and quality compromise, but ignore the overall impact of those tactics in the long run. Additionally, managers in one department do not have visibility to the procurement of another department, creating conflicts in the future. Companies need to shift from a tactical view to a strategic view for procurement and operations, as well as an enterprise based structure for better results.

Inventory Issues: Similarly, the utility business is expected to have high standards of service. Therefore, a great amount of non-moving and slow-moving inventory is kept on stand-by for emergency situations, involving a big sum of capital. Also, a lot of time and inventory is being written-off, due to expiration of their shelf life or main machine replacement, with new technological advances. The concept of “just-in time” inventory, through supplier collaboration, will help avoid the cost of holding inventory for long periods. Additionally, a regular and thorough health monitor of critical machines, via predictive maintenance, is also a way of keeping the faults at bay, avoiding preventive actions.

Network Modeling: In addition, power generation is moving towards a decentralized model with non-conventional sources, such as roof-top solar panels. So, network modeling of distribution networks plays a vital role in responding to the demand of scattered customers. Tools like SCADA (Supervisory Control and Data Acquisition) and DMS (Data Management System) are effective at understanding load feeder conditions. From the lens of a developing or third-world country, this approach can be very helpful in providing power to the last man. Efforts like Restructured Accelerated Power Development and Reforms Programme (R-APDRP) in India are encouraging the use of technology for improving reliability and reducing aggregate technical & commercial (AT&C) losses.

Data Analytics: Power utilities need to work on analyzing data (predictive analysis) for a better response to customer demands. Additionally, this is necessary to guarantee that there is no over-generation or under-generation of power. They must move towards a “pull” rather than a “push” strategy. Cases from Texas wind farms and Germany’s renewable (solar and wind) energy sources are classic examples of over-production, making utility companies pay consumers (negative prices) for the usage of energy. Power utility companies can work with trade agreements involving blockchain technology.

Future Outlook: Since electric vehicles are coming up to speed in cost and quality with combustion vehicles, power utility companies can play an important role within the EV industry. Utility companies can leverage their existing infrastructure for investments in EV charging mechanisms. This will help boost the new EV technology, and assist utility companies in stabilizing the grid, during off-peak hours, and manage the huge demand from EV charging.

How CGN can help: CGN holds expertise in the field of cost reduction, continuous process improvement, inventory handling, and supply chain modelling. We have worked with Fortune 100 clients improving their operational efficiencies, across multiple industries, creating successful partnerships, transforming these companies into successful enterprises, by producing long-term solutions to their immediate problems.

Aman DeepAman Deep
CGN Global
Senior Consultant
Tom RauchTom Rauch
CGN Global
Managing Principal